A Taxing Problem

David Cameron has called on the Government to allow small and medium-sized businesses to defer their VAT bills for up to six months due to the pressure they are coming under in the current banking credit crisis.

Despite the fact that our Westminster Labour Administration would not be particularly favourable to such a plan – at face value it sounds like a good idea, doesn’t it? Well sadly it’s not – and here’s why, as Dr Richard North kindly explains:

There are, however, just one or two tiny little problems with this idea. VAT is, of course, an EU tax, implemented via the VAT 6th Directive. A payment holiday on VAT would amount to a de facto reduction in the rate of tax, which is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

That, though, might be the least of Mr Cameron’s tiny little problems. Member states are required under EU law to collect VAT, a proportion of which goes to the EU coffers – known as the ‘own resource’. Collection procedures are also defined by EU law, requiring the imposition of penalties on late payment – typically one percent per month. Changing these procedures unilaterally, guess what, is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

Under certain circumstances, member states are entitled to adopt a simplified procedure for charging VAT, under Directive 2006/69/EC, but that does not include any provision for delaying tax payments. To the contrary, the Directive allows special provisions to enable member states to “prevent distortion of competition,” which rather shows where EU priorities lie.

If these hurdles were somehow to be overcome, however, unilateral action by the UK in offering a tax holiday would certainly be considered a ‘distortion of competition’ under Single Market rules. At the very least, Commission permission would have to be given, which will not necessarily be forthcoming.

And, since Mr Cameron’s proposals affect only small and medium-sized businesses, larger firms might be moved to complain. A company like McDonalds, for instance, would have a just complaint. It regards itself as a ‘group of small businesses’ under one banner. Fighting as it does for market share in competition with other high street outlets, it could argue that different rules on payment would most certainly distort competition.

There is also the matter of state aid. Broad-brush aid – which includes tax-breaks of any form, directed at one sector rather than applied uniformly – would most likely be considered illegal. At the very least, Commission approval would be required, which might not be forthcoming.

Then there is one other tiny little detail. Numerous studies – not least this one - have drawn attention to the danger of deferred VAT payments, making the system even more vulnerable to fraud. This is already a massive problem. Would Mr Cameron want to add to that problem?

David Cameron is calling for something which is practically unachievable. I’m just passing on this important message in case anyone is reading…

No Action Offered

‘No action offered on migration’ says the BBC News website headline – a phrase derived from a Conservative party press release by the Shadow Immigration Minister, Dominic Grieve.

This comes after Labour’s Immigration Minister, Phil Woolas had been forced to partially backtrack on comments he’d made in an interview with the Times about reducing the number of immigrants entering Britain.

In a post-Times interview, Phil Woolas told the BBC’s One Show:

I think, frankly, there’s a lot of nonsense talked about the cap…

The European Union population can come and go just as we from Britain go and live in Spain, perhaps, or France - so, too, can others come to our country.

So it’s very difficult to see, even if we are in favour of a cap, what it should be.

And here, for once, we have the truth from a Government Minister – well, almost. Phil Woolas is indeed right that there is ‘a lot of nonsense talked about the cap’. It is nonsense because, as even the dim-witted journalists at the BBC have finally grasped:

Immigration from inside the EU cannot be controlled, and neither can a limit be placed on genuine claims for asylum.

We cannot control immigration whatsoever within the European Union as our old friend EU Commission Directive 2004/38/EC put pay to that. However, in his interview with the One Show, Phil Woolas fails to actually mention the elephant in the room (ie. the role of the European Union). To mention the EU directly in British Westminster politics is just not the done thing.

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A Lack Of Opposition

On Friday I posted an article entitled The Continuation of Failure in which I argued that the Conservative party was no longer a true opposition to our current Labour administration due to a complete lack of differentiating policies.

Now, if both Labour and the Conservative party support our membership of the European Union (which they both very much do) then they also by extension support the 70% to 80% of new laws, regulations and bureaucratic dictates that are issued by our real government presiding in Brussels.

Labour and the Conservatives can claim that they disagree with individual directives and EU legislation, but at the end of the day they have to accept it (and willingly do so) because that is how the EU works. You cannot pick and chose which policies and laws you adhere to; it’s all in or stay out. There is no in between.

Thus, given that neither Labour nor the Conservatives are prepared to advocated a policy of EU withdrawal, this already indicates a clear majority of agreement between the two parties – and that is without even taking into account their similarity on the national domestic issues over which our Westminster administration still has some miniscule level of control.

On domestic issues David Cameron has said he might give Parliament a ‘free vote’ on the repeal of the Hunting Act 2005 or ‘let sunshine win the day’ (whatever that might mean), but has pledged nothing meaningfully or substantially different to what our Labour administration are currently undertaking.

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Democratic Legitimacy

With violence and the intimidation of voters increasing by the day in Zimbabwe, leader of the MDC, Morgan Tsvangirai has announced that he will not contest the Presidential run-off because a fair vote is now virtually impossible.

Politicians in the West have been very quick to condemn the tyrannical regime of Robert Mugabe and the apparent illegitimacy of his continued rule. Gordon Brown has on numerous occasions criticised the lack of legitimacy with which Mugabe has managed to cling onto office in Zimbabwe.

Similarly, our Foreign Secretary, David Miliband made a statement to reporters and the media in which he commented:

We face a critical crisis of legitimacy because it’s clear that the only people with any shred of legitimacy are the people who won the March 29th first round and that was the opposition.

The problem is that Gordon Brown and David Miliband wouldn’t know what democratic legitimacy was if it came up and punched them in the face (which quite a few people would like to do).

By ramming the Lisbon Treaty through Parliament without the referendum they promised, which was arguably illegitimate and undemocratic, Mr Brown and Miliband have proven that they are prepared to condemn the lack of democratic legitimacy in Zimbabwe without upholding such values themselves.

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